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Stock Option Station

Option LEAPS

by Joy MacKay

LEAPS is an acronym for Long -term Equity AnticiPation Securities.. When you purchase a call LEAP, you have all of the rights of a common stockholder except voting and receiving dividends. For this reason, many people buy LEAPS as a less risky alternative to buying the stock outright.

Option LEAPS Info

Option LEAPS are long-term options that expire at particular times. In fact, these options expire the third Friday of January, 2004, 2005, or 2006. There are two kinds of option LEAPS: puts and calls. They otherwise trade like most other options.

These LEAPS can help you if the market takes a downturn. Perhaps you are reluctant to sell your stock but want to avoid devaluation of your portfolio if the market were to crash. In this case, you can buy what is ultimately insurance on your portfolio to protect your wealth.

You can sell covered calls on option LEAP calls to make extra profits regularly. This is called a calendar spread. You can buy a LEAP call and sell a covered call on a shorter-term call at an equal or higher strike price.

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